JBS parent company pleads guilty in bribery cases

J&F Investimentos, parent company of JBS, agreed to pay a criminal monetary penalty of $256,497,026 to resolve the investigation into bribery charges. At the same time, J&F and JBS reached an agreement with the U.S. Securities and Exchange Commission (SEC) to pay nearly $27 million to resolve similar charges.

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BCFC | Bigstockphoto.com
BCFC | Bigstockphoto.com

J&F Investimentos, a Brazil-based investment company that owns meat and poultry company JBS, has agreed to pay a criminal monetary penalty of US$256,497,026 to resolve the  investigation into violations of the Foreign Corrupt Practices Act (FCPA), the  U.S. Department of Justice (DOJ) announced. 

At the same time, J&F and JBS reached an agreement with the U.S. Securities and Exchange Commission (SEC) to pay nearly US$27 million to resolve bribery charges. 

Both agreements were announced on October 14.

Settlement with Department of Justice

The agreement was made in response to an investigation into J&F’s scheme to pay millions of dollars in bribes to government officials in Brazil, in exchange for obtaining financing and other benefits for J&F and J&F-owned entities.

J&F pleaded guilty and entered into a cooperation plea agreement with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York in connection with a criminal information filed today in the Eastern District of New York that charged J&F with one count of conspiracy to violate the anti-bribery provisions of the FCPA.

According to a material fact on the JBS Investor Relations webpage, a leniency agreement was entered between J&F and the Brazilian Federal Prosecutor and Wesley Batista, former CEO of JBS, and Joesley Batista, former chairman of JBS, entered into collaboration agreements with the Brazilian Office of the Prosecutor General.  While the plea agreement imposes a penalty of more than US$ 256 million, J&F is receiving a 50% credit for amounts paid to Brazilian authorities and is therefore required to make a payment of US$128,248,513 to the American authorities, the material fact stated. Wesley and Joseley are brothers, and are sons of JBS founder and namesake José Batista Sobrinho.

Since JBS is not a party to the plea agreement, it will not bear any liabilities arising from it.

The DOJ stated that J&F agreed to continue to cooperate with the U.S. government in any ongoing or future criminal investigations concerning J&F, its executives, employees or agents for a three-year period. J&F also agreed to enhance its compliance program, and report to the government on the implementation of its enhanced compliance program.

According to admissions by J&F, between 2005 and 2017, the company conspired with others to violate the FCPA by paying bribes to government officials in Brazil in order to ensure that Brazilian state-owned and state-controlled banks would enter into debt and equity financing transactions with J&F and J&F-owned entities, as well as to obtain approval for a merger from a Brazilian state-owned and state-controlled pension fund. 

Specifically, between 2005 and 2014, J&F engaged in a bribery scheme involving more than $148 million in corrupt payments that were promised and made to and for the benefit of high-level Brazilian government officials, including a then-high-ranking executive at Banco Nacional de Desenvolvimento Econômico e Social (BNDES), a Brazilian state-owned and state-controlled bank.  In exchange for the bribe payments, J&F was able to obtain hundreds of millions of dollars in financing from BNDES.  In addition, J&F paid bribes worth more than $4.6 million to and for the benefit of a high-ranking executive of Fundação Petrobras de Seguridade Social (Petros), a Brazilian state-controlled pension fund in exchange for obtaining Petros’s approval for a significant merger that benefited J&F.  J&F also paid approximately $25 million in bribes to a high-ranking official in the legislative branch of the Brazilian government in order to secure hundreds of millions of dollars of financing from Caixa Econômica Federal (Caixa), a Brazilian state-owned and state-controlled bank. 

 “With today’s guilty plea, J&F has admitted to engaging in a long-running scheme to bribe corrupt officials in Brazil to obtain financing and other benefits for the company,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division.  “As part of this scheme, executives at the very highest levels of the company used U.S. banks and real estate to pay tens of millions of dollars in bribes to corrupt government officials in Brazil in order to obtain hundreds of millions of dollars in financing for the company and its affiliates.”

J&F, JBS settle with Securities and Exchange Commission

In a related matter with the U.S. Securities and Exchange Commission (SEC), J&F, JBS, and the Batista brothers agreed to pay $26,866,565 to resolve charges arising out of an extensive bribery scheme that took place over multiple years. 

The SEC’s order, according to a press release from the commission, found that the Batistas engaged in a bribery scheme in part to facilitate JBS’s 2009 acquisition of U.S.-based poultry company Pilgrim’s. 

According to the order, following that acquisition and while serving as board members of Pilgrim’s, the Batistas made payments of approximately $150 million in bribes at the direction of a former Brazil finance minister, using in part funds from intercompany transfers, dividend payments and other means obtained from JBS operating accounts containing funds from Pilgrim’s. 

As set forth in the order, according to the SEC, the Batistas exerted significant control over Pilgrim’s, which shared office space, overlapping board members and executives, accounting and SAP systems, and certain internal accounting controls and policy documents with JBS and its U.S. affiliate, JBS USA.  The order finds that as a result of that control, the Batistas caused the failure of Pilgrim’s to maintain an adequate system of internal accounting controls and accurate books and records.  The order also finds that the Batistas, who signed Pilgrim’s Pride’s financial statements, did not disclose their conduct to Pilgrim’s Pride’s accountants and independent public accountants.

“Engaging in bribery to finance their expansion into the U.S. markets and then continuing to engage in bribery while occupying senior board positions at Pilgrim’s reflects a profound failure to exercise good corporate governance,” said Charles Cain, chief of the SEC Enforcement Division’s FCPA Unit. “This brazen misconduct flies in the face of what investors should expect from those occupying the role of an officer or director of a U.S. issuer.”

The Batistas, J&F, and JBS consented to the SEC’s order finding that they caused Pilgrim’s Pride’s violations of the books and records and internal accounting controls provisions of the FCPA and agreed to cease-and-desist orders.  Further, JBS agreed to pay approximately $27 million in disgorgement and the Batistas each agreed to pay a civil penalty of $550,000.  The parties must also comply with a three-year undertaking to self-report on the status of certain remedial measures.  As also announced today by the Department of Justice, J&F pleaded guilty to conspiracy to violate the FCPA and will pay a criminal penalty of over $256 million. 

JBS, on its investor relations website, stated that Pilgrim’s Pride is not a part of the resolution reached with the SEC and will not bear any liabilities related to it.

Pilgrim's Pride antitrust settlement

In other legal action, Pilgrim’s Pride, entered into a plea agreement with the United States Department of Justice Antitrust Division in respect to the federal agency’s investigation into allegations that Pilgrim’s and other top poultry companies conspired to fix prices and rig bids for broiler chicken products. Under that agreement, Pilgrim’s agreed to pay a fine of $110,524,140.

That action was also announced on October 14.

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